Financial infrastructure is the set of institutions that enable effective operation of financial intermediaries. This includes such elements as payment systems, credit information bureaus and collateral registries. More broadly, financial infrastructure encompasses the existing legal and regulatory framework for financial sector operations.
Collateral Registries: Secured lending is the most preferred form of lending in formal credit markets, and yet property valued about $9.3 trillion in developing countries is not translated to productive use and thus classified as “dead capital” because of non-existing or poorly functioning collateral laws and registries.
Credit Reporting: Credit reporting systems are essential to creating sound financial infrastructures that facilitate lending and help expand access to credit to a significant share of individuals, microfinance, and small and medium enterprises. Also, they help satisfy lenders' need for accurate, credible information that reduces the risk of lending and the cost of loan losses. Research indicates that lending is higher and credit risk is lower in countries where lenders share information, regardless of the private or public nature of the information-sharing mechanism.
Securities Markets: Securities markets, particularly bond markets, are increasingly in demand by emerging market countries to finance key areas with high developmental impact, such as infrastructure, housing, and microfinance.